6 Reasons You Should Invest In ETFs Today

Written by The Money Lab Team on November 11th, 2015

6 Reasons You Should Invest In ETFs Today

ETFs are a brilliant option for investors both experienced and new to the market.

I like to think of them as a smart investor’s ‘secret weapon’.

In fact, if you’re not invested in ETFs right now, you’re completely missing out on one of the markets easiest investment vehicles.

They’re cost effective, require very little effort, give you easy access to your investments, and you can even start with just R300!

But these are just some of the reasons ETFs are an avenue you should consider for your money.

Let me show you the 6 main reasons ETFs deserve a spot in your portfolio.

 

The Advantages of Investing In ETFs

 

Reason #1: Diversification at the click of a button

ETFs are well-diversified investment vehicles.

By trading an index, you’re exposed to the many companies listed in that specific index.

This exposure can reduce your risk, not to mention it can also enhance your performance considerably.

 

Reason #2: Why pay tax on your investments when you don’t have to?

Simply put, ETFs are Tax-efficient.

Because they're index funds, most ETFs have very little turnover, and build up far fewer capital gains than an actively managed mutual fund would.

They also don’t attract income tax, like a bank deposit.

ETFs are also one of the main ways you can use your tax free savings account to invest.

And if you do so, that means no dividend, income or capital growth tax, and no initial, advisor or performance fees either!

Lastly, ETF transactions are exempt from Securities Transfer Tax (STT).

 


 

 


 

Reason #3: They’re simple to trade

ETFs are a no-hassle way to trade!

You can even buy & sell them at just about any time of the day.

And seeing as they’re exchange traded they’re liquid enough for you to be able to get in and out pretty much whenever you want.

This means you can capitalize on intra-day highs and lows when considering selling and buying respectively.

 

Reason #4: An instrument flexible to your investment style

Depending on whatever direction you like to trade, ETFs can help you do it.

You can short (sell) or go long (buy) ETFs.

This is great, because ETFs essentially track indices and you can long or short your position depending on where you anticipate the market will go.

So as a tradable instrument, they’re flexible to different types of investors.

 

Reason #5: They’re super cost-effective

They allow you to enjoy diversification at a low cost.

That’s the beauty of ETFs.

When it comes to shares you have to pay transaction costs on every share you invest in.

With ETFs, you can invest in 40 shares and only pay ONE transaction fee.

In fact, you can even invest in the top 40 shares through an ETF for as low as 0.19% a year!

 

Reason #6: ETF transparency

ETFs are completely transparent.

You know what companies you’re investing in and what percentage exposure you have in each.

This makes tracking the performance of your ETF quick and easy!

 

How To Add ETFs To Your Portfolio Today

 

ETFs are a ‘no brainer’ as far as I’m concerned.

And there are 3 simple ways you can become an ETF investor today.

You can buy your ETFs through your stockbroker.

For some this might be the easy option, but it’s certainly not the only one available to you.

The second way to buy ETFs is though the actual ETF provider.

Certain companies provide ETFs, these include Absa Capital, Deutsche Bank, Nedbank Capital, Satrix, RMB, Grindrod Bank, STANLIB and Standard Bank.

And you can buy ETFs through some of the companies that provide them.

The other way to start investing in ETFs today is by going through an ETF platform.

If you’re interested in a solid ETF investing platform, have a look at ETFSA or Easy Equities.

The best part about of investing through platforms like these is you can save a bunch on lower costs and fees!

Here's to profitable investing. 

The Money Lab Team